Bitcoin price has fluctuated in the range for 126 consecutive days, but analysts said an explosive trend is about to occur.
Bitcoin Lack of volatility has been a major point of discussion for traders over the past two weeks, with sideways trading in the $18,000 to $25,000 range currently lasting for 126 days. Most traders agree that major price volatility is imminent, but what exactly do they make this argument based on?
Let's look at three data points that predict the surge in Bitcoin volatility.
volatility weakens and sellers are exhausted
According to Glassnode's research, "the Bitcoin market is ready for volatility", and the on-chain and off-chain data flashes multiple signals. The researchers noted that the actual volatility in the week has dropped to 28%, a level that is usually accompanied by large price fluctuations.
Bitcoin achieved fluctuations in 1 week. Source: Glass Node
Exploration of Bitcoin aSOPR, which "measures the average realized profit and loss multiples of coins used on any day", showing:
"At present, there is a huge difference between the price trend and the aSOPR indicator. As the price is sideways consolidating or falling, the locked loss is decreasing, which indicates that sellers are exhausted within the current price range."
Bitcoin adjusted SOPR. Source: Glassnode
In addition to the divergence between price and adjusted SOPR, short-term Bitcoin holders are approaching breakeven as short-term holders SOPR approaches 1.0.
This is important because the reading of 1.0 has historically been at the resistance level during bear markets, and traders tend to exit positions near breakeven.
If aSPOR breaks through 1.0 and turns to support, this may be an early sign of emerging trend changes in the market.
Bitcoin Short-term Holder SOPR. Source: Glassnode
Trading indicator is also at the fulcrum
Independent market analyst Big Smokey pointed out that multiple technical analysis indicators also show a strong directional trend is coming.
According to analysts,
Bitcoin price range, SuperGuppy and Bollinger Bands have become very nervous. ETH looks the same. You know what this means. pic.twitter.com/e7s6ScG7jz
— Big Smoky (@big_smokey1) October 18, 2022
Encryption research firm Delphi Digital recently published a similar view, saying that the “compression” within the Guppy multiple moving average is “a sign of short-term momentum and rebound potential as the queue tries to flip the long-term moving average.”
On October 10, Delphi Digital researchers referenced the Bollinger Bandwidth Percentage (BBWP) metric and proposed the possibility of “a major move that BTC is brewing.” "Historically, BBWP readings above 90 or below 5 marked the main swing point," the researchers explained.
BTC price and Bollinger bandwidth percentage. Source: Delphi Digital
Related: Bitcoin reflects the situation before the outbreak in 2020, but analysts do not agree whether it is different this time. The current situation of Bitcoin derivatives
Encrypted derivatives market is also flashing with multiple signals. Bitcoin Futures open contracts have reached an all-time high of 633,000 contracts, while daily trading volume has plummeted to a multi-year low of $24 billion. Glassnode noted that these levels “last came in December 2020, before the bull cycle broke through the 2017 cycle $20K ATH.”
Bitcoin futures open contract. Source: Glass Node
As expected in a bear cycle, the amount of liquidity or inflows into and out of the market has declined, strengthening the reason that people believe that the ultimate soar in volatility may lead to large price fluctuations.
Although derivative indicators such as futures open contracts, long clearing and coin margin futures open contracts are breaking years of records, it is important to note that neither of these can provide absolute certainty of market direction.It is difficult to determine whether most market participants are long or short , and most analysts believe that the surge in open positions reflects the working hedging strategy .
What is certain is that on-chain data, derivative data and basic technical analysis indicators all point to the explosive trend that is about to occur in Bitcoin prices.
Bitcoin is a bit unusual for a long time to be in low volatility, but looking back at the data provided by Glassnode and Delphi Digital can provide valuable insight into what happens when certain on-chain metrics reach a specific threshold, which should give investors some ideas on how to position them.
In the crypto industry, if you want to seize the next bull market opportunity, you have to have a high-quality circle, so that everyone can join forces to keep warm and maintain insight. If you are the only one, looking around at a loss and finding that there is no one, it is actually very difficult to persevere in this industry.
If you want to join us for warmth, or if you have any questions, please join us
Thank you for reading, see you next time!
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